TBY talks to Kadyrzhan Damitov, President & CEO of the Kazakhstan Stock Exchange (KASE), on the main components of the stock exchange, the effects of new legislation, and the People’s IPO.
TBY What have been some of the performance and development highlights of the Kazakhstan Stock Exchange (KASE)?
KADYRZHAN DAMITOV We are a part of the global market, and any international trends immediately affect our local market. Unfortunately, in 2011 the KASE index dropped by 35.7%, but during the same time period, volumes remained equal to those in 2010. The largest sectors of our market—forex and repo—showed similar trading volumes, although volumes in repo for corporate securities dropped by 2.5 times. At the same time, trading in corporate bonds increased by approximately 8.7%. In 2011 we launched trading in futures, and the trading volume on this market reached $20 million. In 2011, the National Bank became the sole regulator for the financial market, including the stock market, banking, and pension funds sectors. The National Bank used to be the financial market regulator until 2004, but a separate agency for the supervision of the financial markets and organizations was created as a regulatory body. Currently, the agency is merged with the National Bank and has committee status. In 2012, KASE has a number of important tasks to accomplish, the first being the introduction of necessary changes to its internal regulations in accordance with amendments made to laws on joint-stock companies and the financial market concerning risk minimization. The amendments came into force on February 1, 2012. In compliance with the new law, KASE established the Clearing Department to undertake clearing on all markets.
What strategies and incentives will the KASE implement to increase market activity?
Our main objective is to increase liquidity in the stock market, and it requires a number of actions to stimulate investors and issuers. A number of attractive instruments will be offered to the public with the commencement of the People’s IPO program. To successfully carry out the program, KASE is working to improve its internal operations, regulations, and infrastructure. We encourage close interaction between our members and continuously work on stimulating their activity on the market. For example, we’re about to commence a new program aimed at motivating market makers who maintain narrow spreads by providing sizeable rewards. In order to provide investors with more convenient means of trading on the KASE, we are working to introduce direct market access. We believe that this tool would attract more retail investors to trade on the KASE and will make it much easier for them to get involved in the upcoming IPOs.
How would you evaluate the readiness of the public for the People’s IPO?
It is planned that the first company to undertake an IPO will be KazTransOil, which is involved in the transportation of crude oil, refining, and oil and gas pipelines. The shares are expected to go public in fall of 2012. As this program is a government initiative, we believe that the maximum effort will be applied to create awareness and increase financial literacy among the population through a variety of media. The KASE’s contribution to educate the public about investment opportunities is carried out through our continuous work with local universities. Our staff conduct workshops for students using an in-house development training trading system. This system allows any individual to learn the necessary skills for trading on the exchange. In this way, we’re building a new generation that is financially literate and able to create personal investment strategies.
How do you see companies of various sizes emerging and showing interest in the KASE?
Generally, we see a good amount of interest from companies of all sizes, but because this is the period after the global crisis, there are different expectations. It is possible that some negative processes will take place on global markets, and for our companies and investors it is not an easy time to predict the activity of the market in the future. However, we feel that large- and medium-sized companies are seeking to come to the KASE and utilize our listing mechanisms for capital raising purposes. In 2011, a number of companies from the oil and gas sector listed their shares on the KASE. Other companies from different sectors of our economy also listed their shares and bonds in order to increase the transparency of their business activity. Although there is a vast amount of public information about companies available in general, the level of transparency increases with each listing. In 2012, we are seeing increased interest in listing on the KASE from different companies.
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